The weekly spin: On Landis, cannabis, and navigating sponsorship law

On October 4, Floyd Landis announced that his Colorado-based cannabis business, Floyd’s of Leadville, was taking on the title sponsorship of Silber Pro Cycling, a Canadian Continental team.

On October 17, Canada enacted Bill C-45, the Cannabis Act, legalizing recreational cannabis use with caveats on how it can be promoted.

As it turns out, these two events may prove to be incompatible.

Landis launched Floyd’s of Leadville in 2016, a mail-order business selling hemp and cannabidiol (CBD) products, which are claimed to alleviate soreness in athletes. Many, including Landis, view CBD as alternative to opiates and other prescription drugs; the inspiration for the brand stems from his own experience overcoming addiction after competing and living with chronic pain for years.

He connected with Silber team director Gord Fraser, his teammate on the Mercury squad from 1999-2001, in August 2018 at the Colorado Classic. The Silber team, launched in 2014 and managed by Scott McFarlane, was losing title sponsor Silber Investments after a five-year run. Landis signed on to fund the team with money he’d been awarded in the settlement of a long-running federal whistleblower lawsuit against Lance Armstrong. The sponsorship would promote his brand of CBD products.

Passed by Canadian Senate in June, the Cannabis Act regulates all cannabis products containing any amount of tetrahydrocannabinol (THC) the same way, whether that is 0.3% or 30% — they are equally subject to the same prohibitions. That includes promotional prohibitions, such as endorsements and sponsorships.

And while Floyd’s of Leadville is based in Colorado, the Montreal-based team is registered with the UCI through the Canadian national federation, which in turn receives federal funding through Sport Canada, a branch of the federal government’s Department of Canadian Heritage.

So, in essence, what we have here is money from a federal lawsuit in the United States being transferred from a Colorado-based cannabis brand to a Canadian cycling team that is registered through Canada’s federally funded national governing body, running afoul of federally mandated promotional regulations regarding cannabis.

It’s all very federal.

I connected with Landis, as well as a representative of Health Canada, the agency overseeing enforcement and implementation of the Cannabis Act, for further understanding. It’s complicated, but what seems certain is that the team will not be representing Floyd’s of Leadville while racing on Canadian soil in 2019.

“I think there are some moving parts on some legislation trying to clarify what they mean,” Landis said, “but right now they left the law to cover marijuana and hemp. They make a distinction here [in the United States] for the most part, across the board, whereas in Canada they didn’t do it in that legislation.”

“It appears that, out of caution, we probably won’t call the team Floyd’s of Leadville, we’ll just call it something else, but I‘m not sure what yet. Hopefully that legislation will get sorted out, or we’ll just have to locate it somewhere else.”

CBD vs THC

CBD and marijuana share similarities, but they are not the same. Both are cannabinoids, just two of around 200 chemical compounds unique to cannabis plants. They come from different strains of the cannabis genus, however marijuana is harvested for its buds, which contain psychoactive properties, while hemp is harvested for stalks and seeds.

And while both contain THC, hemp has much lower concentrations of THC (less than o.3%) than marijuana (which contains anywhere from 5-35% THC) and much higher concentrations of CBD, which lessens the psychoactive effects of THC. CBD causes no substantive high whatsoever; it’s often described as “relaxing, but not intoxicating.”

Typically packaged in the form of concentrated oil or cream, CBD is believed to have anti-anxiety effects, as well as an effective treatment for insomnia and post-traumatic stress. Some studies have shown that it may have anti-inflammatory properties, and many CBD products are marketed for relieving chronic pain, such as arthritis. Other studies have found CBD to be an effective treatment for seizures, particularly for epilepsy. A strong argument has been made that CBD products can help fight or even prevent opioid addiction, as it did with Landis.

In December 2017, the World Health Organization declared in a report that cannabidiol “does not appear to have abuse potential or cause harm.” The WHO also wrote that CBD may have “therapeutic value” for epileptic seizures, but that further study is needed to determine its potential medical use.

According to a report by Hemp Business Journal, CBD sales in the United States reached $820 million in 2017 and are expected to grow to $2.1 billion by 2020, with $450 million of those sales coming from hemp-based sources. It’s worth mentioning that Landis also owns and operates a marijuana business, Floyd’s Fine Cannabis, which he says is a separate entity and will have no affiliation with the cycling team.

As of 2018, CBD was included on the approved list of substances by the World Anti-Doping Agency, which stated that while cannabidiol is no longer prohibited under the Cannabinoids category, THC continues to be prohibited.

It’s noteworthy that while many states have legalized the use of recreational marijuana, under the Controlled Substances Act [CSA] the US government classifies marijuana as a schedule 1 drug, meaning it’s perceived to have no medical value and a high potential for abuse. However the US Drug Enforcement Agency recently drew a distinction between CBD derived from marijuana plants and CBD deriving from hemp plants, which are allowed to be grown for industrial purposes under the 2014 federal Farm Bill. So long as the strain of the plant is for hemp and not marijuana, they’re also allowed to be cultivated for CBD.

In a May 2018 directive to federal agencies, the DEA wrote, “Products and materials that are made from the cannabis plant and which fall outside the CSA definition of marijuana (such as sterilized seeds, oil or cake made from the seeds, and mature stalks) are not controlled under the CSA. Such products may accordingly be sold and otherwise distributed throughout the United States without restriction under the CSA or its implementing regulations. The mere presence of cannabinoids is not itself dispositive as to whether a substance is within the scope of the CSA; the dispositive question is whether the substance falls within the CSA definition of marijuana.”

That distinction, however, has not been drawn in Canada — at least not when it comes to regulating promotion of cannabis products. Both marijuana and hemp products are legal for purchase and use, but their promotion is uniformly prohibited.

The Cannabis Act, and promotion prohibitions

For Health Canada, questions surrounding the Cannabis Act and its regulations as pertaining to the sponsorship of a pro cycling team by a CBD manufacturer and retailer were met by… referring to the Cannabis Act and its regulations.

Admittedly I was asking them in the week building up to the legalization date, but most answers I received were along the lines of “we’re not sure, this all brand new, we’re taking it as it comes.” The term “case-by-case basis” was used on several instances.

Eventually one of Health Canada’s media relations advisors referred me to a fact sheet on the Cannabis Act and promotion prohibitions, presented here in an edited form.

“The Department has established a dedicated unit and resources to monitor and enforce promotion prohibitions under the Cannabis Act. Health Canada assesses compliance with the Act on a case-by-case basis. The particular facts of each circumstance presented would be examined and considered. The purpose, content, and context of a communication or message and the intended audience are examples of factors that could be taken into consideration in determining whether there is promotion, and whether that promotion would be prohibited.

Cannabidiol (CBD) products are subject to the Cannabis Act and its Regulations. The Government has made its position regarding promotional activities clear by setting out prohibitions in the Act. The prohibitions apply to all individuals and corporations in Canada, and will prohibit several types of promotional activities altogether, such as:

• Promotion that is appealing to youth;• Promotion that includes false, misleading or deceptive information;• Promotion through sponsorship of people, events or buildings;• Promotion through any testimonials or endorsements;• Promotion using the depictions of persons, celebrities, characters or animals;• Promotion that presents a product or a brand in a manner that associates it with a particular way of life (such as one that includes glamour, recreation, risk, excitement or daring behaviours) or a positive or negative emotion.

The Government’s goal is to protect public health and public safety. This includes protecting young persons and others from inducements to use cannabis as set out in the purpose section of the Act. That is why the Cannabis Act prohibits promotion, advertising, sponsorships, endorsements or other forms of promotion that might encourage young people to use cannabis. The Cannabis Act also prohibits any products, promotion, packaging or labeling that could be appealing to young people.

So, it can’t appeal to youth. It can’t be sponsorship of a person or event. It can’t present a product or brand that associates with recreation, risk, or daring behaviors. Sounds like a pro cycling team sponsorship is out.

Further, the email clarifies that the Cannabis Act “contains a number of enforcement tools that may be considered in determining the appropriate actions to prevent or address non-compliance” up to monetary penalties of $1 million — significantly more than Landis is investing into the team.

When pressed to clarify whether or not these prohibitions would specifically apply to a professional sports team promoting CBD products, another Health Canada media relations advisor replied with the following message, also edited for length:

The Cannabis Act clearly prohibits several types of promotional activity altogether (e.g., sponsorship) while permitting authorized individuals or corporations to engage in informational promotion (e.g., ingredients, THC or CBD levels) or brand-preference promotion, providing these promotions are communicated in a way that would not be seen by a young person and meet the Act’s overall prohibitions.

In implementing this new legal framework, Health Canada has not required individuals or corporations to seek pre-clearance or pre-approval of promotional activities related to cannabis, which is the case with other industries regulated by Health Canada, such as health products or medical devices. This provides individuals and corporations with flexibility to engage in permitted promotions provided they adhere to the Act’s overall prohibitions.

As with any legal framework, it is ultimately the responsibility of individuals and corporations to ensure that they have a comprehensive understanding of the law and that they comply with its requirements. Health Canada assesses compliance with the Cannabis Act on a case-by-case basis. This is because the particular facts of each circumstance may well differ, possibly leading to different determinations on a case-by-case basis as to compliance with the law.

While we cannot comment on the specific situation that you have cited, we can confirm that the Act very clearly prohibits promotion through the sponsorship of people, events or buildings. This means that any sponsorship of an event whereby a producer of cannabis provided funding for an event in exchange for the promotion of, for example, its company name, brand or trademark, would likely contravene the Act.

Cycling Canada, which handles the team’s registration for the UCI (because it is a Continental squad) — and could potentially find itself also in violation of the Cannabis Act — referred my questions to team manager Scott McFarlane. McFarlane replied that he was still in discussions with the federation. Ultimately, I reached out directly to Landis, who answered questions on the murky topic as best he could.

“We had a few calls with the CEO of Cycling Canada and legal counsel in Canada to try and figure it out, and at the end of day we didn’t know either, but on the side of caution, because Health Canada is overwhelmed, instead of forcing them to deal with it now, we’ll put it on the back burner and assume we can’t do it, at least for 2019,” Landis said. “We’ll have to call it something else in Canada, that’s all but 100% certain.”

“I think Canada just decided, ‘we’re legalizing everything all at once, let’s keep it fairly controlled at first,’” he continued. “I assume that over time these laws have to get adjusted, because you cannot foresee every possible implication of whatever rules you’re writing, so you try to write a robust set of laws, and you try to envision what that might mean, but there’s simply no way to think of every possible outcome. That’s how these things end up being highly restrictive to start with. It’s a matter of caution, to make sure it gets done right.”

The Silber Pro Cycling team rode at the front in defense of the race lead on Stage 2 of the 2016 Larry H. Miller Tour of Utah.

Navigating sponsorship law, and UCI rules

All of this is not without precedent. There’s a reason there are no pro cycling teams in France sponsored by beer or wine companies; a law passed in 1991 prohibits any sponsorship activity which has, “as its object or its effect, publicity, directly or indirectly, in favor of alcoholic beverages.” Under the French law, alcoholic beverages are those that contain more than 1.2% of alcohol. It’s this law that prohibited Liverpool Football Club from displaying the logo of Danish beer brand Carlsberg, its longtime sponsor, during the 1997-98 UEFA Cup, held in France.

There are similar laws in place for tobacco sponsorship in the United States (though a tobacco brand probably wouldn’t be a great fit for a cycling team.) The U.S. Food and Drug Administration restricts how tobacco products may be advertised or promoted, including on sponsorships: “Manufacturers, retailers, and distributors are prohibited from sponsoring or causing to be sponsored any athletic, musical, artistic or other social or cultural event, or any entry or team in any event… identifiable with those used for any brand of cigarettes or smokeless tobacco.”

With a CBD sponsorship under the Cannabis Act, we’ve moved into new territory. Floyd’s of Leadville doesn’t conduct business in Canada, the sponsorship is a Canadian-based marketing vehicle for an American product that might happen to sometimes be promoted in Canada. And no, there is not an equivalent law in the US. In fact, former Criterium du Dauphine winner Andrew Talansky, now a pro triathlete, is sponsored by Floyd’s of Leadville. But that’s the US, and that’s triathlon.

It’s possible Floyd’s of Leadville could race under a different title in Canada. A team with interchangeable sponsors throughout the season is not out of the ordinary — Belgian squad Lotto-Soudal has raced various events as Lotto-FixAll at different points across the 2016-2018 seasons, most recently at the Giro d’Italia. Landis’ team could represent Floyd’s of Leadville at the Tour of Utah, and something entirely different at the Tour de Beauce.

“I’m not sure if the UCI would allow us to have separate jerseys or not, and I didn’t really look into that,” Landis said. “I just assumed that they would not allow that. But if we could do that, we’d simply have separate jerseys, with one that didn’t have anything relative to our business on it.”

Swapping out sponsors while competing in different countries may pose one question for the UCI; the question of a CBD title sponsorship may pose another issue altogether.

UCI rule 1.2.030 (which becomes rule 1.1.089 next year) states “no brand of tobacco, spirits, pornographic products, or any other products that might damage the image of the UCI or the sport of cycling in general shall be associated directly or indirectly with a licence-holder, a UCI team, or a national or international cycling competition.” Sponsorship from betting companies is also highly restricted.

As defined by the rule, a spirit is “a beverage with a content in alcohol of 15% or more,” which is what enables Amstel Gold is to sponsor the biggest race in The Netherlands every year.

What’s undefined, of course, is what would be considered damaging to the image of the UCI or the sport of cycling in general. Could the UCI decide that a substance allowed by WADA and believed by many to have therapeutic value would be considered “damaging to the image of the sport” simply because it comes from the same plant family as marijuana? Perhaps.

The rule is clear that sanctions could include fines, refused race starts, refusal or withdrawal of UCI registration, and refusal or removal from the calendar for an event organizer. The rule, however, makes no mention of cannabis products.

Landis didn’t appear too worried about the UCI rule. Maybe that’s because he suspects the international federation has bigger concerns than the title sponsorship of a Canadian Continental team. Maybe it’s because six weeks have passed since the news of the sponsorship was announced, and he’s heard nothing. Maybe it’s because pro mountain-bike and cyclocross racer Teal Stetson Lee was sponsored by the KYND Cannabis Company and MYNT Dispensary last year, so precedent has already been set. Maybe it’s because sponsoring a team on the verge of collapse can only be seen as helping the sport of cycling, rather than damaging it.

Maybe it’s because after all of the legal battles Landis has experienced in his time with cycling — with Mercury team management, over unpaid wages; with USADA, across two highly public arbitration hearings; with the US government, over defrauding supporters of nearly $500,000 in 2007 and 2008; and with Armstrong, across an eight-year case that involved the US Department of Justice — this all feels minor by comparison.

As for the Cannabis Act and Canadian law, however, he said it’s just one more hurdle in his return to pro cycling.

“At the end of day, it doesn’t matter that much to me — given who I am, and the fact that the people who go to the bike races will generally know how the team came to be regardless, I don’t see so much outside attention coming in that we would be missing out on some benefit,” he said. “It’s not perfect, I’d rather have my name on it, but if it’s going to be an issue, I’d rather avoid it.”

The weekly spin is a column from our Editor at Large offering commentary and analysis on topics ranging from racing to tech to industry to travel to simple observations from the saddle.

Excuse the interruption …

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